With revenues plummeting and federal aid in short supply, many states are scrambling to fill holes in their budgets. The easiest way to do it? Raise taxes.
At least ten states are considering major increases in the near future. They are:
- Arizona
- Connecticut
- Delaware
- Illinois
- Massachusetts
- Minnesota
- New Jersey
- Oregon
- Washington
- Wisconsin
Two states have already implemented significant increases: California and New York.
That means that at about a quarter of all states are raising taxes to meet budget shortfalls. If you take those that don’t have income taxes out of the equation, it’s closer to a third. The bad news is that number is expected to climb.
Adding to the income tax woes are shortages in sales tax revenue. Sales tax revenues are at their lowest in years, fueled by a general decline in the sales of taxable goods across the country. Some experts worry that increasing income taxes will only contribute to the drop in sales tax, creating even more problems.
It will be interesting to see what states follow… The number of federal mandates (like No Child Left Behind) has not decreased while funding for those programs has. Add that to increasing jobless claims and foreclosures (and those related costs) and many states will have bigger problems, not fewer. Is your state next?
Not right now. But there’s a chance that you might in the future: the moratorium on an internet tax expires November 1. The moratorium is sometimes referred to as the Internet Tax Freedom Act, or ITFA.
ITFA has been extended twice since 1998. It bans taxes on certain internet transactions at the federal level, but also prohibits state and local governments from passing similar taxes with the exception of nine states which were allowed to keep existing internet taxes. The internet transactions are: internet access (including dial-up, DSL, cable modem and wi-fi); “double tax” for products or services bought over the internet; and discriminatory taxes that treat internet purchases differently from other types of sales. Those nine states which are current exempt from the ban are Hawaii, New Hampshire, New Mexico, North Dakota, Ohio, South Dakota, Texas, Washington and Wisconsin; not surprisingly, most of the governors of these states appear to oppose making the ban permanent since the exemptions will not be included in a permanent bill.
Nonetheless, a handful of Senators, including John McCain (R-AZ), Trent Lott (R-MS) and John Sununu (R-NH) have suggested a permanent internet tax ban. Not surprisingly, fearing both loss of revenue and potential for abuse, there is opposition to a permanent ban on both sides of the political spectrum who have offered a number of alternatives. One suggestion is to limit the length of the moratorium rather than make the ban permanent – but so far, that isn’t getting much support.
What do you think? You pay tax on your phone connections, why not the internet? That is the loudest argument, after all, against the permanent repeal – the fact that cell phone service is taxed and is at an all time high. So, the thinking goes, how bad can it be? Well?
digg_url = ‘http://www.digg.com/tech_news/Do_You_Owe_Uncle_Sam_for_Reading_This’;
